Energizer Holdings - A Progress Report
Summary
- We saw Share gains from increased focus at Energizer.
- There were share losses at Duracell and Rayovac.
- The gap between Energizer and Duracell has closed from 17.2 share points in January to 11.1 share points for the period ended Nov. 5.
- Hurricane Matthew contributed about $21 million to the category.
Background
Energizer (NYSE: NYSE:ENR), spun off as an independent battery company on July 1, 2015, is showing the share gains we anticipated as an independent company with increased focus on the battery category. The spin-off of Duracell to Berkshire Hathaway (NYSE: BRK.A, BRK.B) in February 2016 has been hampered by the normal integration management of an acquisition, complicated by the need for restructuring and integration into an organization with no prior battery experience or CP G infrastructure.
The Energizer - Duracell Share Interactions
The continuing story is the tradeoff between Energizer and Duracell in shares since the beginning of the year. Within Nielsen outlets the shift in the gap between Energizer and Duracell has moved 6 share points in Energizer's favor, from 17.2 for the four weeks ended Jan. 23, 2016, to 11.1 for the latest four weeks ended Nov. 5, 2016.
Within Nielsen outlets, I have observed the facings improvements at Walmart with none of the fanfare of the original losses; Energizer, Duracell and Rayovac (Spectrum, NYSE: SPB) are now at 38%, 27% and 35%, respectively. I see similar share of shelf improvements in non-Nielsen outlets such as Home Depot (HD). Energizer has also spoken of distribution gains including recovery of some of the losses of a few years ago, but without any specifics.
This sets the stage for a return to the historic relationship between these two major battery brands. The current 11-point gap should be sustainable and brings them back to the 11-point gap we saw in 2013. Energizer has spoken about keeping the fight for distribution and space rational and profitable. If they execute on that philosophy and don't get too greedy, they should be able to avoid an over-reaction from Duracell. Sustaining that gain would be worth about +6% for the North American business and +3.5% for the global entity.
Just a bit more on share. From the graph, you can readily see the Energizer gains, but note that share is coming at the expense of Duracell and Rayovac.
The Battery Market
The battery market within Nielsen outlets continues to be flat with the bumps we saw in the last two Nielsen periods related to Hurricane Matthew producing an incremental $16 million within Nielsen and about $21 million across all outlets. Each of the battery companies garners their fair share of that increment.
New information from another Seeking Alpha contributor and sourced from the 1010Data blog gave me a new and larger perspective for on-line battery sales. So, the market is doing better than the flat we see in Nielsen. Without at least another reference point, I cannot really develop a trend, but my guess would be a market running about plus 1% per year.
Conclusion
Energizer increasing looks like they are capitalizing on the focus for share growth, and looks like they are doing it in a careful profit oriented style. We have not seen enough from Duracell to really understand the underlying strategy or focus. The new agency selection of Wieden and Kennedy bears watching. They are a good strategic agency that could impact long-term thinking at Duracell.
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Analyst’s Disclosure: I am/we are long ENR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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